The flagship mobile money service M-Pesa launched in India last month. The service, which started in Kenya in 2007 and has since expanded to eight countries and 17 million users, will be conducted in India by way of a partnership between Vodafone, India’s second largest mobile network operator, and ICICI Bank, India’s largest private sector bank. India’s unbanked population towers at roughly 700 million.

M-Pesa will roll-out in India in phases, beginning with a first effort in the eastern areas of the country. Across Kolkata, West Bengal, Bihar, and Jharkhand, this initial phase boasts a network of 8,300 agents. M-Pesa in India will include cash deposits and withdrawals, money transfers to any mobile device in the country, airtime top-ups, bill payment services, and the ability to make purchases at select stores. With an initial agent network in the thousands and an unbanked population making up the better part of a billion, the ambitions and scope of M-Pesa in India are indeed large. But before we start mentally converting chunks of India’s 700 million unbanked individuals to banked, let’s take a closer look at a few factors that will affect the service’s success.

Mobile Phone Penetration. India has the second largest mobile phone base in the world with over 900 million users. Though as the average Indian user has 2.2 SIM cards, the number of individual subscribers is actually about 319 million – a population penetration of about 25 percent, and rising quickly. However, subscriptions to M-Pesa are limited to clients of Vodafone. Although Vodafone is the second largest mobile network operator in India, it holds only 17 percent of the market. In comparison, Vodafone in Kenya services about 70 percent of the country’s mobile subscribers, and that market dominance is thought to be one of the major success factors, because it allows most cell phone users to connect with most other users.

Regulation. Mobile money services in India, unlike in Kenya, need to be linked to formal bank accounts. This creates the additional requirement of mobile money users meeting account-opening and other bank guidelines. In Kenya, any Safaricom mobile user can use M-Pesa.

Competition. Along with preexisting mobile money services, such as Airtel Money, which was launched early last year, M-Pesa in India faces competition from the country’s branchless banking industry. Since their introduction in 2006, business correspondents (BCs) have reached an estimated 100 million individuals. Adding momentum, last year the Reserve Bank of India promoted legislation permitting BCs from any one bank to conduct business for other banks, as well. This helped expand the possibilities for MFIs, NGOs, and telecoms, like Vodafone, to partner with banks and further extend offerings of mobile financial services.

I look forward to watching this and the program’s subsequent roll-out phases in the months to come. Will M-Pesa/India grow like it did in Kenya, where it grew to 2.7 million users in its first 14 months? Or will it look more like M-Pesa in Tanzania, which only signed 280,000 users in its first 14 months (though there are now over 5 million M-Pesa subscribers in Tanzania)? Or, being India, will we see the kind of scale we have never seen before? Anyone want to bet on 27 million users by 2014?

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